All About the Definition

I absolutely agree with Slate's analysis, Matt. Here's another good one, although written in an unpleasantly partisan tone. (As a wise man said once, just because a Republican believes something doesn't mean it isn't true).

Reasonable people can disagree on how healthy the economy is right now, but as soon as you hear someone saying that some economic statistic is worse that it's been since the Great Depression, you've gotta assume something is terribly wrong - not with the economy, but with this guy's "statistic." In this case, we're using an early-20th-century definition of "savings" and assuming it means the same thing it did a hundred years ago.

It doesn't, of course. There's many reasons why it doesn't, but a useful one on which to focus is the issue of 401(k) accounts. There's over 3 trillion dollars invested in such accounts and they don't count as savings. Huh?

Moreover, I also agree with the other conclusion of the Slate article, which is that "savings" as defined in the saving rate is for dumbasses or very old people or a combination. Why on earth would you put your long-term money in a bank? The rates are ridiculous and the tax implications are grim. There has famously been no 30-year period ever when stocks did not outperform other asset classes. And these days it's easier than ever. There's these fantastic retirement mutual funds that have a target date and automatically adjust themselves into less-risky classes as the date arrives; there's index ETFs which give excellent diversification and very low costs; and of course there's employer matching which means that if you're preferentially "saving" instead of 401(k)-ing, you're giving away free money.